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Heller Ehrman White & McAuliffe’s Julian Stern started out almost 40 years ago as a personal and tax lawyer for Dr. Alejandro Zaffaroni, the young Uruguayan scientist who would go on to pioneer time-release drug delivery and build a pharmaceutical empire out of Palo Alto, Calif.’s Stanford Industrial Park. The relationship evolved as Zaffaroni’s flagship company, Alza Corp., grew to 1,800 employees and spawned numerous pharmaceutical company licenses and four spinoffs. Alza became Heller Ehrman’s largest life sciences client — with as many as 40 lawyers at a time working on Alza business — and in the process helped Heller develop into a leading biotech firm. But with the $10.5 billion acquisition in March of Alza by New Jersey-based Johnson & Johnson in the fourth largest pharmaceutical deal in history, Heller Ehrman’s relationship with the company is in limbo. “Thirty-three years is a long time to be involved with a client, and losing the personal relationship with probably the leading life sciences company in the area is not something that makes me jump up and down with joy,” Stern said. “But at the same time it was a very good transaction for everybody.” Also up in the air is what will become of Peter Staple, the one-time Heller Ehrman associate and Stern prot�g� who went on to become general counsel and executive vice president of Alza. “It’s really too early to comment specifically,” said Staple, 49. He said he’s working with Johnson & Johnson executives to plan the future look of the newly merged Alza, and that most major decisions are still more than 100 days away. Staple isn’t worried. “They have a strong track record of doing a good job of acquisitions and on managing acquired companies on a decentralized basis, without trying to micromanage and while maintaining corporate cultures.” But outsiders say virtually the opposite, characterizing Johnson & Johnson’s legal department — and its entire management system — as highly centralized. “Johnson & Johnson has a big legal department and they don’t have general counsel” for each of their operating entities, said law firm consultant Peter Zeughauser. He contrasted the company to General Electric Co., which he said allows each of its 13 subsidiaries to retain its own legal department and general counsel. Johnson & Johnson GC Roger Fine didn’t return phone calls to his office. Stern said he expects Heller Ehrman will lose most of its transactional and securities work to East Coast firms like Cravath, Swaine & Moore, which Johnson & Johnson used on the Alza merger. But Stern said he hopes Johnson & Johnson will still use Heller Ehrman for its day-to-day needs on employment, real estate, environmental and litigation matters. “All of those things continue on and the company’s here, so we’re certainly hoping we’ll continue on in those areas,” Stern said. Stern noted that he’s worked with Johnson & Johnson over the years on various licensing agreements for Alza. “We’ve always gotten along very well, and I’d think there would be some mutual respect there,” he said. The story of Heller Ehrman and Alza dates back to 1962, when Zaffaroni opened the Palo Alto office of Syntex Research, the Mexican company that invented the birth control pill. Zaffaroni first met Stern when he sought him out for tax planning and “personal affairs,” Stern said. Both men now are 76. “We became very close — he’s a wonderful person, very creative,” said Stern, who dropped his tax practice to become a full-time corporate life sciences lawyer as his relationship with Zaffaroni and Alza progressed. “When he decided he wanted his own company I advised him and negotiated getting a little technology out of Syntex to start the company. It was basically his inventions, and Syntex didn’t want him to sue.” Stern and other Heller Ehrman lawyers — including partner Sarah O’Dowd, who was on the Johnson & Johnson merger team — helped grow Alza, ushering the company through an IPO and its first profitable quarter in 1982. The firm also brought Alza through several financings, numerous licensing and marketing agreements with major drug companies, including Johnson & Johnson, the development of the smash-hit blood-pressure drug Procardia XL, and the spinning off of such companies as DNAX, Affymax, Affymetrix and Maxygen. In 1999 Alza moved its headquarters to Mountain View, Calif., where Zaffaroni still has an office. One result of Alza’s growth was the hiring of Staple, the company’s first GC, in 1994. Staple had been working in-house at Chiron Corp., where he ended up after its merger with Cetus Corp., the company he’d left Heller Ehrman for in the mid-1980s. In his tenure with Alza, Staple’s responsibilities included raising money, working with clinical testing sites, creating marketing relationships and dealing with the regulatory aspects of marketing and sales. In January 2000 he was also given the title of chief administrative officer, and oversaw human resources, facilities, corporate and investor relations and government and community affairs. In this capacity he built a sales and marketing staff of more than 900 people and grew his legal team to 15 lawyers. “It’s been an incredible experience because the company has been through a transition from being a company that built products for other marketing organizations, to where it has become a fully integrated pharmaceutical company that develops products for itself as well as for others,” Staple said. Staple, a New Jersey native who said he favored the merger, is vague about his plans for the future. He won’t speak to the likelihood of staying with the newly acquired company, or whether Johnson & Johnson’s legal team has signaled that they want to keep him. “I haven’t had a lot of opportunity to give that much thought. I have immensely enjoyed the opportunities I’ve had here at Alza, and would like to continue on the path of learning new things and seeking out new opportunities.” But Stern thinks that the onus would be on Johnson & Johnson to entice Staple to stay with them: “I’d believe he’d be looking for something more challenging than the position if he were to stay,” he said. “Peter’s a very capable person, not only as a lawyer, but he’s an excellent administrator. I think it will be more a matter of what he wants to do.” About the rest of the Alza legal team, Stern said: “There will be certain people that probably won’t be around, but the day to day still needs to get done. They’ll still need the patent lawyers there, but it’s less interesting to the people on top because they have less responsibility.” And as for Heller Ehrman, firm chairman Barry Levin thinks the experience with Alza has provided firm lawyers with a case study of how to successfully grow a life sciences company. “One of the good things about that relationship is that a lot of lawyers at Heller learned a lot about representing life sciences companies, and we’ve been able to take that expertise to help build one of the premiere life sciences practices in the country,” he said, ticking off life sciences clients the firm did IPOs for last year, which included Maxygen, Cepheid and Compugen. “We’ll have to replace a major life sciences client with another one,” Stern said. “Companies come and go, and small companies become bigger and you get more work from them. Hopefully the others will grow just as Alza grew.”

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